Greenspan has been so highly regarded in so many circles that he will likely leave a very impactful legacy. I believe that many a future Fed Chairman will take a cue from Greenspan's M.O. and hence the Greenspan effect will likely be felt for many years to come. The market will likely assume that the new Chairman will maintain the methodology employed by Greenspan and will likely not panic until shown otherwise by screw-ups on the part of the new Chairman.
Check your history. Then check your account.... gonna be some fun fun. As everyone knows low Vol always leads to high Vol. Make sure you ain't short Vega.
Other factors. Rise in oil price is a drain on economy -- that is not getting priced into products of the u.s. So as a result the oil price is a serious tightening. Also I believe that many of the big players in the world believe that the "bond market vigilantes" are the defacto controllers of interest rates. Consequently over time the premium people demanded in long term rates has been squeezed out. In other words. AFter the 70s and early eighties. Even if the long term rate should be projected at 4% sellers demanded 6% because of the unknown risk of future mismanagement of interest rates. Now with global bond markets capable of doing justice quickly. That future risk premium is almost unnecessary. So perhaps long term rates should be at 3-4%. Finally, with the risk that the Euro becomes a long term joke like New "Coke" -- where would you invest your money right now.
Good points. But I'd say biggest risk = possibility all of the above has been discounted. Or do we need "Inflation -- RIP" on the cover of Time before the turn?
With Vols this low how is the discounting of risk....risk? "It not enough to know the average opinion..... one must know the average opinion of the average opinion." ----Lord John Keynes---